Protocol Buybacks

SolStrategy enables the buyback of CNT to the protocol, clearing up its balance sheet for the issuance of more debt.

Why buybacks?

Similar to bonds in traditional finance, CNT is only softly pegged to the price of SOL. While there is a clear arbitrage if the price of CNT exceeds SOL, the opposite is not true. A price discrepancy between CNT and SOL is natural and expected, and a similar phenomena exists in TradFi.

If the bond price drops below a certain equilibrium price, it become profitable for the protocol to buyback its own debt than to issue new debt. This is net profitable for the protocol as it is essentially selling high and buying low.

This buyback keeps the balance sheet of the protocol healthy, enabling it to issue more debt at attractive prices.